Regulatory Review: Satellite Fees In Europe–A High Price To Pay

by Gerry Oberst

The 43 members of the European Conference of Postal and Telecoms Administrations (CEPT) have created a patchwork quilt of satellite service fees and charges that even the bureaucrats admit is stifling growth. In a report under preparation by a CEPT agency for well over a year, regulators have noted “there are currently as many different types of fees charged as countries across CEPT.”

To put this chaos into perspective across Europe, imagine the situation if each U.S. state government licensed earth stations, with no established practice for how licensing fees could be set. California could charge a single fee for a network of stations, Texas could base its charges on power level and bandwidth, Maine might not charge anything, and Illinois would change its fees each year. Some states would charge up to five different fees, some exceeding $250,000 for a five-station VSAT network, but that same network would cost $40 if located in a far larger neighbor state.

Would this help the rollout of new satellite services that provide nationwide coverage? Not likely–but that is precisely what the satellite industry faces in Europe today.

This situation is, alas, not new. Ever since the satellite sector was opened to competition in Europe, industry has complained about irrational, complex and hard to fathom fee structures. The CEPT issued a report in 1995 on VSAT and SNG licensing that noted the structural problem of unharmonized fees.

This problem continues, and has likely gotten worse as each national regulator has come up with its own bright idea of the best way to charge for satellite facility and service licenses. The recent CEPT report, which was nearing a final version in late September 2001, is based on a detailed review of fee structures for the satellite industry. The regulators use so many variables across Europe, the draft report was forced to conclude that “in each country the fee calculation is based on a combination of [different] criteria, which could nearly result in an infinite number of possibilities.”

The report sought to calculate licensing fees for a variety of hypothetical satellite configurations, with amazing results. At the outset, the report says the accounting criteria are so diverse that it is difficult to find a clear explanation for the varied fees that would apply to the same system. For example, the fees for a 6-meter earth station transmitting in the C-band range from 26 Euros (U.S.$24) to 7,500 Euros (U.S.$6,851). Fees for a Ku-band station range from zero in some countries to 21,000 Euros (U.S.$19,183) in Spain, about 31,000 Euro (U.S.$28,318) in Portugal and Poland, and an astounding 39,000 Euros (U.S.$35,626) in Croatia. Transportable earth station charges range from zero in some countries to over 12,000 Euros (U.S.$10,962) in Italy and the United Kingdom. The median charge for a VSAT network is about 6,000 Euros (U.S.$5,481) in Belgium, while Latvia is obviously seeking to “encourage” VSAT roll- out by charging over 275,000 Euros (U.S.$251,212) for the same network!

The complexity of these schemes, and the many differing approaches, create a great barrier to the roll-out of satellite networks. And the regulators are constantly tinkering with the rules. In just the last six months, the United Kingdom has considered spectrum fees the equivalent of about $5 to $10 per terminal, while the French regulator implemented terminal fees of the equivalent of almost $300.

There are few legal restrictions on these fee structures so far. When the European Union (EU) adopted a directive on telecoms licensing in 1997, it included limits on the ways that fees could be applied to the overall telecoms industry. Unfortunately, the EU limits on fees were worded so loosely that it is difficult to enforce any rules. And few companies have the resources or incentives to sue regulators over fee levels.

One of the few exceptions to this lack of judicial oversight occurred when a German court in late September ruled that the country’s entire fee structure was unlawful. The German Federal Administrative Court confirmed a lower court ruling that the fees were not linked to administrative costs incurred and the population covered by the license. The court held that the German fees were a significant barrier for any new market entrant. At press time, the German government was reviewing its options and whether it would have to refund previously paid fees.

The EU has proposed legislative reforms that could tighten limits on how fees are charged. Nevertheless, this situation will never get better until the nations of Europe seek a more rational and harmonized approach toward the licensing of pan-European satellite networks. There may be some merit or rationale for each separate fee structure in each European country, but taken together, they are an impediment to the development of new services that the continent as a whole says it urgently wants to foster.

Gerry Oberst is a partner in the Brussels office of the Hogan & Hartson law firm. His email address is [email protected].